The Philippine Bakery Sector Research Report 2022

Staff Paper
MSU is an Affirmative Action/Equal Opportunity Employer
The Philippine Bakery Sector
A market research report
by
Mollie Woods and Suzanne Thornsbury
Submitted as a final grant report to
Jamie Zmitko-Somers, MDA
Staff Paper 2009-05 August 2009
Department of Agricultural, Food,
and Resource Economics
MICHIGAN STATE UNIVERSITY
East Lansing, Michigan 48824

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The Philippine Bakery Sector
A market research report by Mollie Woods and Suzanne Thornsbury
Executive Summary
 Like much of Southeast Asia, the Philippines provides a growing market for premium
food products. The economy has grown steadily by at least 5% per year every year since
2001. Urban population in the Philippines is estimated to be growing at three-times the
rate of overall population growth – concentrating food demand geographically.
 Economic growth, and especially employment in service sector jobs, is driving demand
for more convenient and prepared foods.
 The Philippines is a member of the Association of Southeast Asian Nations (ASEAN).
The Philippines is also a member of the World Trade Organization (WTO). The U.S. and
Philippine Free Trade Agreement, though negotiated for many years, has yet to be
finalized.
 White bread is the most commonly eaten baked item in the Philippines, though rising
health consciousness is increasing demand for more healthful options.
 The global recession and rising flour and transport prices have had effects across the
entire food sector in the Philippines.
 Small portion or single serve bakery items are becoming more popular as consumers
become more cost conscious.
 Sales of all baked goods in the Philippines have increased over the past five years.
Artisanal, independent bakeries command the largest share of bread and cake sales, but
not pastry sales.
 The supply and distribution system for bakery ingredients, specifically fruit ingredients,
is not well documented, however two major European bakery ingredient companies have
an established presence in the Philippines.
 Rising levels of obesity, heart disease, and diabetes in the Philippines have prompted
increased consumer interest in healthy and nutritionally enhanced foods and government
interest in promoting healthier eating and lifestyles.
 Food service is increasingly important in the Philippine market with growth in the
number of service based jobs, especially business process outsourcing centers. In 2008,
demand for canned preserved fruits led growth among all products in the food service
sector.

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Introduction
Like much of Southeast Asia, the Philippines provides a growing market for premium
food products targeted toward consumers desiring more convenience, less at-home food
preparation, and foods designed to improve health. Despite their ranking as a lower-middle
income economy, per capita gross national income increased from $1,060 to $1,420 between
2000 and 2006. National GDP growth was 7.3 percent in the first half of 2007, among the
highest of Southeast Asia middle-income countries. Population demographics are also changing.
Urban population in the Philippines is estimated to be growing at three-times the rate of overall
population growth – concentrating food demand geographically. Life expectancies continue to
increase, increasing emphasis on health benefits potential of foods and lifestyle. The Philippines
is an important trading partner with the U.S. and overall U.S. agricultural exports to the
Philippines have been growing steadily in recent years.
For the Michigan fruit ingredient industries, the Philippines represents potential for
international market expansion. Several industry products meet the needs of new-economy
Filipino consumers. Ingredients for the active (and growing) Philippine bakery industry include
canned, individually quick frozen (IQF), and dried fruit. These could fit well with demand for
new “western” style baked goods. Finding a new emerging market outlet would be very
beneficial to the Michigan industries.
To capture potential benefits from Philippine market access, the Michigan fruit industries
need better understanding of the food distribution channels including potential infrastructure
impediments. Manila has been ranked by USDA as one of the largest, most rapidly growing
coastal urban areas in the Asia-Pacific region with important investments in port development
and modernization. However, inter-country transportation is still reported to be under-developed
in many cases. In-country air transport may well be less expensive (and more timely) than over-
the-road. Currently the World Bank is funding a National Roads Improvement and Management
Program (entering Phase 2 of 3) which may significantly improve distribution potential.
Demographic Characteristics of the Philippines
The Philippines has an estimated population of 97.97 million people (CIA, 2009). About
61 percent of the population falls between 15 and 64 years of age and 35 percent are less than 15

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years old. The median age of Filipinos is 22.5 years and the population growth rate is positive
and 1.96 percent. About 65 percent of the Filipino population lives in urban areas (CIA, 2009).
Even with urbanization, a large percentage of the Philippine population is employed in
agriculture (35%) though the majority of employment is in the service sector (50%).
Employment in industry and manufacturing is about 15 percent of total employment.
Leading agricultural commodities produced in the Philippines are sugarcane, coconuts, rice,
corn, bananas, cassavas, pineapples, mangoes, pork, eggs, beef and fish. The top commodities
for export, including industrial manufactures are electronic products, mineral fuels, machinery
and transport equipment, iron and steel, textile fabrics, grains, chemicals, and plastic (CIA,
2009).
Electronic and plastics manufacturing are important to the Philippine economy. Also
important are remittances to the Philippines from workers living abroad and business process
outsourcing centers (BPO). Within the manufacturing industries, businesses with employees of
20 or more make up the majority of establishments (39%), while larger businesses with 50 to 200
employees account for about 37 percent of all businesses. In the smaller business size category,
the leading companies are of the type listed in the table below:
Table 1. Employment in small manufacturing
Type % of establishments
Plastic products 5.5%
Garments 4.7%
Printing 4.1%
Bakeries 3.7%
Semiconductors 2.6%
(NSO, 2008)
The majority of the Filipino population and much business and industry are concentrated
in the National Capital Region (NCR) surrounding Manila (population 10.5 million in 2000; area
accounts for 60 percent of all retail sales; see Appendix I for map). The regions with the most
manufacturing following the NCR are the Calabarzon region and the Central Luzon region,
respectively (NSO, 2008).
The Philippines is comprised of a series of islands. There are major sea ports located at
Cagayan de Oro, Cebu, Davao, Liman, Manila, and Nasipit Harbor (with the port at Cebu being